Rachel Reeves has been warned that her new 22% tax plan for savers could backfire, as experts say it will deter people from investing. Last month, the Labour Party Government announced a 22% charge on the interest on cash savings held within non-cash ISAs, including stocks and shares ISAs.
Experts Warn of Increased Complexity
Wander Rutgers, UK CEO of investment platform Lightyear, told Investment Week: "The government is selling these ISA reforms as a way to get more people investing, but they will do the opposite. The single biggest reason people do not invest is that it feels complicated, and these rules pile on more complexity, not less."
Anna Macdonald, investment strategy director at Hargreaves Lansdown, said that this new rule will make investing even harder for people to understand, which would mean people remain intimidated by the concept. "It is hard to see how adding this level of complexity will encourage more people to invest in stocks and shares," she said.
Confusion for Savers
Kevin Mountford, personal finance expert and co-founder of Raisin UK, said: "Any change to ISA rules risks creating confusion for savers, particularly when many people are already trying to make their money work harder in a higher-tax environment." He warned savers with cash in a Stocks & Shares ISA to check with their provider to see how the money will be treated from April 2027.
"For savers, the priority should be to check what type of ISA they have and where any cash is sitting," he said. "If you are holding cash inside a stocks and shares ISA, particularly for a long period rather than as a short-term step before investing, it may be worth speaking to your provider about how the upcoming rule changes could affect you. Consumers should not feel rushed into investing because of rule changes, but they should take this as a reminder to review their savings, compare rates and make sure they are using tax-free allowances where possible."
